Extension of patent term in New Zealand based on unreasonable IP Australia delays?
Article written by: Tim Jackson | Tuesday 17th May 2016
Extension of patent term in New Zealand is one of the more controversial issues arising out of the Trans Pacific Partnership Agreement (TPPA). New Zealand does not currently allow extension of patent term. Opposition to allowing such extensions has been widespread and has focussed on the perceived cost to the country’s health budget and restricted access to medicines. Proposed new legislation will mean that unreasonable delays by IP Australia (not just IPONZ) in the granting of New Zealand patents can result in New Zealand patent term extension.
Annette King, the Labour Party’s Health spokesperson, has expressed her concerns that a five-year extension to drug patents could cost taxpayers an extra $1 billion and would also delay access to medicine at an affordable cost . The Minister of Trade at the time, Tim Groser, said in response  that:
“"The Government is taking a careful approach to pharmaceutical patent issues in TPP to ensure any agreed outcome does not impact medicines access or costs to New Zealanders"
If the TPPA is ratified, New Zealand will provide for extensions of patent term. In fact, New Zealand will allow extensions as a result of delays that could occur in two separate regulatory processes (i) unreasonable delays in patent grant and (ii) unreasonable curtailment of effective patent term due to Medsafe’s marketing approval process, and perhaps both. The TPPA Amendment Bill , which amends New Zealand law as part of the implementation of the free trade agreement, had its First Reading on 12 May 2016.
An extension for unreasonable curtailment of the effective patent term due to Medsafe’s marketing approval process is restricted to pharmaceutical patents. What “unreasonable curtailment” means remains to be seen, but clearly the intention is to provide an efficiency incentive for Medsafe.
Somewhat surprisingly, a more significant issue arises out of allowing extensions on the basis of unreasonable delays in patent grant. This is surprising because this option is the more accepted and understood option for allowing such extensions. Extensions on this basis have generally been considered to be a very unlikely outcome due to the Intellectual Property Office of New Zealand’s (IPONZ) ability to process patent applications quickly.
However, New Zealand is also in the midst of a number of other changes to its intellectual property landscape in addition to those as a result of the TPPA. One of these proposed changes overlaps with TPPA obligations and has the potential to affect New Zealand’s ability to control the extent of its own patent monopolies.
The Patents (Trans-Tasman Patent Attorneys and Other Matters) Amendment Bill  (the “Bill”) is currently before Parliament. Its genesis was in the push for a single economic market between Australia and New Zealand under the Closer Economic Relations Agreement dating from the mid-1980s.
In its First Reading (9 February 2016)  the Bill received widespread support from all political parties, although Gareth Hughes (Green) prefaced his comments with the observation that: “I have found that talking about patent law is a sure-fire way to lose people to talk to at parties and a sure-fire way to fall asleep at night…”.
The Bill, amongst other things, provides for a single patent application process and single patent examination for New Zealand and Australia. The Bill says this is intended to “…enable processing of the applications to be shared between IPONZ and IP Australia, but with each application to be processed according to the law of the country in which the application seeks patent protection”. Essentially this means that IP Australia would be able to process a New Zealand patent application through to grant as though it was IPONZ, and vice versa.
Political support in the First Reading of the Bill was based on the following general premise, as stated by Paul Goldsmith (Minister of Commerce and Consumer Affairs):
“Single, more efficient patent application and examination processes will remove duplication for both businesses and intellectual property offices of Australia and New Zealand. These processes have the potential to create significant savings for businesses and exporters needing professional advice and related services for obtaining patent protection. It will also make it easier for businesses to protect their inventions in both countries. A business will be able to prepare and file one patent application and pay one fee to either IP Australia or the Intellectual Property Office of New Zealand, granting a patent in Australia and New Zealand.”
A laudable objective indeed but it is naïve to think that a single patent application and examination process, even if efficient, will create significant savings for businesses and exporters needing professional advice and related services for obtaining patent protection. Professional advice will be needed whether or not there is a single, more efficient patent application and examination process. This will still involve the preparation of a patent specification; searching to determine freedom to operate and novelty issues; advice on patentability; and the inherent risks and benefits of the patent procedure, amongst other things. New Zealand businesses already only need to prepare one patent specification for use in New Zealand and Australia. A single filing and the payment of one fee will not save much in any real sense. It is difficult to imagine there will be significant savings for businesses and exporters.
It is also unlikely that the single process will actually be more procedurally efficient. When reporting on an interview with the President of the New Zealand Institute of Patent Attorneys, Corinne Cole, on NBR radio , the NBR stated with respect to the Bill that: “The Ministry of Business Innovation and Employment (Mobie) advice on the legislation says New Zealand already processes patent applications “much more quickly” than Australia and the changes will slow New Zealand down”. This is not being more procedurally efficient.
The advice referred to in the NBR report was provided to Ministry of Business Innovation and Employment (then the Ministry of Economic Development) in October 2011 by the Sapere Research Group (entitled: “Trans-Tasman harmonisation of intellectual property law regimes – the costs and benefits”) .
New Zealand’s ability to process patent applications “much more quickly” than Australia brings extension of patent term based on unreasonable delays in patent grant under the TPPA back into focus.
The issue of extension of patent term was not mentioned in the First Reading of the Bill. This is not surprising since it was probably not brought to the attention of Parliament, but its impact is potentially significant (perhaps enough to keep Gareth Hughes awake at night…).
The combination of the Bill and New Zealand’s TPPA obligations means that unreasonable delays by IP Australia (not just IPONZ) in the granting of New Zealand patents can result in extensions of New Zealand patent terms. This is the result of allowing IP Australia to process New Zealand patent applications as proposed in the Bill. It would be illogical to suggest that New Zealand patent applications processed by IP Australia will not be eligible for extensions of term in appropriate circumstances.
For those opposed to any extension of patent term in New Zealand this is not good news. Not only will New Zealand have extensions of patent term for Medsafe delays and IPONZ delays under the TPPA, there will also be extensions available for IPAustralia delays.
There is little incentive for IP Australia to process New Zealand patent applications more efficiently based on the possibility that a New Zealand patent might be extended. IP Australia has its own policy drivers and these are based on Australian, not New Zealand, imperatives. There is also no impact on commercial activity in Australia, only New Zealand.
The NBR article  also reported the following quote from the Executive Summary in the Sapere advice:
“From a business perspective, the key is they are able to control the speed at which the patent is granted. So the loss of the ability to prosecute patents quickly in New Zealand, if that is what the applicant wants, could be a significant dis-benefit. A patent granted is commercially much more valuable than a patent pending. A delay would only have to cost New Zealand businesses applying for a patent an average of $540 to outweigh the benefit of reduced filing and maintenance costs. We see this possible cost as a risk; one that could outweigh the minor benefits if it were to happen”.
The Executive Summary also said, with regard to the benefits of dual patents (i.e. the proposed single patent application and examination process):
“The direct benefits to business are small."
“There is some risk to business from the proposal. IPONZ currently examines patent applications much more quickly than IP Australia.”
“The proposal is more positive for Australia. Australian firms are more likely to file patents in New Zealand, so would stand to benefit more from any reduction in cost.”
“The most substantial benefit from this proposal will go to international PCT (Patent Cooperation Treaty) applicants.”
The Sapere advice to the Ministry of Economic Development was that benefits to New Zealand business were minor and small and that there was also some risk to business from the proposal. The major benefits are going to be to Australian and international business, not to New Zealand business.
The Sapere advice was provided in October 2011, which is well before there was any indication that there would also be patent extensions of term available for unreasonable delays in patent grant. The risk to New Zealand business from the Bill, and also to the wider New Zealand public, as a result of New Zealand’s recent TPPA obligations is now significantly greater. The benefit to New Zealand business remains small. It is extremely difficult to justify the Bill when considering the potential costs to New Zealand’s health budget and restricted access to medicines .
New Zealand has committed to providing extensions of patent term in the TPPA and there are many good reasons for that commitment. New Zealand has not committed to allowing extensions of patent term to be based on delays in another country’s patent procedures. Todd McClay, the current Minister of Trade, would be well advised to adopt his predecessor’s careful approach to pharmaceutical patent issues  when considering the impact the Bill could have on the New Zealand public. It is not just the New Zealand patent attorney sector that the Bill could “screw up” as the NBR article  so aptly puts it.
- Sapere Research Group Report
This article is intended to summarise potentially complicated legal issues, and is not intended to be a substitute for individual legal advice. If you would like further information, please contact a Baldwins representative.